Economy

President Obama's Plan to Forgive Student Loans Is Just a Drop in a Bucket

April 13th 2016

By:
Kyle Jaeger

President Obama took a step in addressing America's student loan crisis on Tuesday by announcing his plan to forgive nearly 400,000 student loans for people with permanent disabilities. However, many critics have noted that it it's a very small step.

The loans Obama plans to forgive only account for a miniscule fraction of the national student debt, which currently sits above $1.3 trillion and rises by almost $3,000 every second, according to data from the New York Federal Reserve.

The student loans being forgiven by the Obama administration add up to about $7.7 billion. The plan to forgive these loans is part of an existing policy that already allows permanently disabled people to apply to discharge their federal student loans, but now the U.S. Department of Education is taking a proactive role in identifying graduates who qualify for the forgiveness program.

"[T]oo many eligible borrowers were falling through the cracks, unaware they were eligible for relief," U.S. Department of Education Under Secretary Ted Mitchell said in a press release on Tuesday. "Americans with disabilities have a right to student loan relief. And we need to make it easier, not harder, for them to receive the benefits they are due."

This chart puts the student debt crisis into perspective.

pie chart

As you can see, that $7.7 billion in student debt represents about half of one percent of the total national debt. The problem isn't going away any time soon, and young people are still graduating with an average of $35,000 in student loan debt, The Wall Street Journal reports.

Proposals to solve the U.S. student debt crisis are being offered by Democratic presidential candidates Hillary Clinton and Bernie Sanders, who advocate for debt-free and tuition-free higher education systems, respectively. The issue has become a major talking point in the 2016 election, and while forgiving federal student debt for permanently disabled graduates is certainly a positive policy, comprehensive student loan reform is an increasingly important political issue in America, especially for young people entering the workforce.

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